Canada fund bids for Mac satellite

By Eric Johnston

1 April 2009 — 12:00am

A CANADIAN superannuation fund has launched a friendly $1.37 billion takeover bid for Macquarie Communications Infrastructure Group, in a move that put the squeeze on short sellers yesterday across the constellation of Macquarie's struggling listed satellite funds.

Coming on the last day of the group's financial year, the deal should also bring in some eleventh-hour fees and help justify asset valuations which have come under scrutiny.

The Canadian Pension Plan, a government-backed fund, will offer $2.50 per MCG stapled security and its associated management vehicle. While this represents a substantial premium to Monday's closing price of $1.50 for the satellite fund, which owns a collection of broadcast assets including television transmission towers, the offer falls well short of MCG's record high of $6.83.

The deal, by way of a scheme of arrangement, is also priced at a discount to the $3.30 valuation placed on MCG by Macquarie's brokerage arm.

MCG, like many of the Macquarie specialist funds, helped drive fast-paced profit growth for the investment bank over recent years.

Advertisement

But they remain out of favour among investors given concerns over their large debts and external management structure.

At the same time, a clutch of imitation satellite funds set up by rivals such as Babcock & Brown are attempting to take themselves private or cut ties with their parent as part of efforts to revive share prices.

Many of Macquarie's listed funds, such as Macquarie Airports and Macquarie Infrastructure, are already pushing ahead with assets sales and fund raisings to pay down debt.

MCG's independent directors, led by Malcolm Long, said the board was disappointed that recent moves to bolster unit prices had had little impact.

In recommending the offer to investors, Mr Long said the deal represented the best outcome.

"We're mindful of some of the challenges facing MCG into the future where things are moving very fast in terms of the availability of capital and the refinancing of assets," he said.

Analysts were critical the board was selling MCG at the low point of the cycle and said debt concerns were overplayed given there were no major refinancing demands until 2014.

Analysts also questioned the timing of the deal, which came as Macquarie yesterday ruled off its first-half accounts. The investment bank was under pressure to make further write-downs across its holdings in satellite funds. The MCG offer helped Macquarie avoid a potential $120 million-plus writedown, and the bid sparked a rally across other Macquarie funds.